The Top Sales Challenges that Insurance Companies Face Today

Selling insurance is not easy. Insurance companies face difficult challenges when attempting to attract and retain customers. Why? One big reason is simply that people hate researching, buying, and paying for insurance. According to a survey by the Huffington Post, respondents said they would rather give up their firstborn child than deal with their home insurer. While we can safely assume these respondents were joking, the sentiment is well taken. So, why do people hate buying insurance so much? Let’s take a look at what market research has to say about consumers and their distaste for insurance companies.

Consumers Do Not Trust Insurance Companies

As far as trust goes, insurance companies are not in good company. Globally, consumers trust insurance companies less than banks and only slightly more than pharmaceutical companies. Those who purchase insurance also have very little loyalty. They tend to switch without premeditation or warning, making it very difficult for insurers to take preventative measures to regain trust in time. When asked what was most important to them, insurance consumers gave cost and value as primary concerns. However, “frequency/relevance of communication” and “level of service received” were also cited as “top” concerns by a third of insurance consumers. This indicates that there is plenty of room to earn and maintain trust with customers, and that this level of reliable engagement could make a big difference in sales and retention.

Consumers Do Not Understand Insurance or its Value

Studies have shown that many consumers do not understand even the most basic insurance language, nor have a clear understanding of how to choose a plan that’s right for them, even if they say they do. In fact, while about 65% of consumers say they understand terms like “deductible”, “coinsurance”, and “copay”, only about 45% of consumers actually do when tested. As one might expect, only 40% of consumers say they feel confident in choosing the right insurance plan for them. It stands to reason that consumers often describe their ideal insurance company as “easy to understand” and “easy to deal with” and offering “clear communication”. Although some insurance companies may gain by exploiting consumers’ lack of understanding, ambiguity will ultimately sacrifice customer loyalty.

Millennials are buying less insurance than any other generation, and less than their age group has bought historically. Their reasons are cultural and financial, but they also have to do with knowledge. While 47% of baby boomers can define the insurance terms mentioned above, only 36% of millennials can. Millennials, compared with their parents, acquire assets and raise families later in life. Many have been able to stay on their parent’s insurance until age 26. There’s little context to learn about insurance, so why would they know when and how much to buy? Auto insurance is frequently the first type of insurance a millennial will purchase. Yet, without the ability to understand a policy, many may be shocked to find that their insurance doesn’t cover the astronomical bill they just got from the auto mechanic after a small collision. Again, there is room here for insurance companies to grow, offering clear resources and explanations that specifically cater to millennials.

Consumers Vary Enormously in Communication Preferences

It’s easy to assume that younger consumers prefer online communication, middle-aged consumers prefer the phone, and older consumers prefer in-person, but unfortunately, it’s not that simple. Insurance companies can and should utilize all three modes of communication for sales and customer support, but that may be easier said than done when customers have such varying tech literacy. For example, there is a huge discrepancy in internet usage and access among senior citizens. Younger and more affluent seniors are shown to be extremely connected, while four out of ten seniors don’t go online at all. These older, less tech-savvy seniors are also the least physically mobile, and most likely to benefit from online support. Nearly 80% of all seniors said they would need help being walked through an unfamiliar process on their computer, tablet, or smartphone. The numbers also vary enormously throughout the insurance buying process. While almost 90% of consumers claim that they would research life insurance online, half would rather purchase it in-person.

The research shows that insurance companies offering trustworthiness, support, patience, and technological versatility are most appealing to consumers broadly, while each generation has their own special preferences and needs. Insurance sales are extremely challenging, but there is plenty of room for innovation, especially in the realm of communication. Again, consumers are quick to switch insurers when the right opportunity comes along. Facing these communications challenges head-on has the potential to make a huge difference.

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